AA Edit | Waive ATM fee for small sums

The Reserve Bank of India (RBI) has decided to accept the demand of banks to allow a marginal increase in fees for ATM withdrawals. The practice of banks charging customers for using ATMs beyond the permissible limit began in 2014. Initially, the ATM fee for transactions beyond the permissible limit was Rs 20, which was revised to Rs 21 in 2019 and has now been hiked to Rs 23.

Banks sought an increase in ATM fees on the grounds of rising maintenance costs at ATMs. Though the hike effected is merely Rs 2 per transaction, it reflects a lack of motivation among bank managements to find innovative solutions to their problems.

According to RBI data, as of January 2025, India had 2,16,706 ATMs, mostly located in prime areas. Banks could have earned additional revenue by allowing their non-banking group companies, with interests in insurance or mutual funds, to use the space to promote their products. They could have also explored the possibility of monetising ATM slips to subsidise operational costs.

Since the introduction of UPI payments, digital transactions have soared in India, while cash withdrawals from ATMs have been steadily declining. Over 57 crore cash withdrawal transactions were made at ATMs in 2022, but the number dropped to 52.72 crore in 2023 and further plummeted to 48.83 crore in 2024.

In this scenario, transaction fees could discourage people from using ATMs, adversely affecting the poor, senior citizens, and digitally-handicapped individuals who prefer cash transactions due to growing digital frauds. If a customer wishes to withdraw Rs 200 from an ATM after exhausting the permissible limit, they would be charged a fee of Rs 23, which amounts to over 10 per cent of the cash withdrawn. The RBI should, therefore, consider waiving ATM fees for small cash withdrawals.